Mortgage News July 11, 2023
The commercial real estate market can be a daunting landscape, with inflation and unpredictable interest rates creating challenges for investors. However, amidst the uncertainties, there is a silver lining – small multifamily properties. These properties are emerging as the low-hanging fruit in the commercial real estate (CRE) space, offering favorable trends and opportunities for both individual and big investors.
Daniel Llorente, the Chief Lending Officer at Florida-based lender Korth Direct Mortgage (KDM), sheds light on this promising niche. In a conversation with Mortgage Professional America, he emphasizes the benefits of considering a smaller portion of the market to secure these properties, which are increasingly popular with investors who face hurdles in obtaining traditional financing.
KDM recognizes this growing demand and has introduced a new program to cater to the underserviced market segment. Llorente explains that right now, they’ve opened up a new program to service this underserviced market and that they do loan amounts now between $20,000 and $5 million. This initiative enables financing options for not only single-family homes but also duplexes, triplexes, and small suburban apartment buildings. Interestingly, these types of properties have been somewhat neglected in the past decade due to their ineligibility for Fannie Mae and Freddie Mac’s small balance loan programs.
The appeal of small multifamily properties extends beyond individual investors. Llorente notes, that the big investors, insurance companies, and banks also have more interest in funding those acquisitions. This indicates a broader recognition of the potential and profitability associated with these properties.
KDM specializes in commercial real estate loans backed by Mortgage Secured Notes. These notes are guaranteed by the loans and typically involve single-asset securitizations or small groups of loans within the $5,000,000 – $50,000,000 range. KDM services these loans and acts as a conduit for the noteholders. In case of default, KDM assumes the role of a special servicer to ensure a smooth resolution for the benefit of the noteholders.
In summary, small multifamily properties present a compelling investment opportunity in the challenging landscape of commercial real estate. With KDM’s new program targeting this underserved market segment, investors have a chance to tap into this lucrative niche. Whether you’re an individual investor seeking promising properties or a larger institution looking to diversify your portfolio, exploring these small multifamily properties could be the key to unlocking success in the CRE space.
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